50 years ago the US Dollar was strong, very strong. Oil was cheap and it was sold in US Dollars by the Middle Eastern producing countries. Little by little that exchange strength has eroded and for the first time ever, in the first quarter of 2003 the US currency had less value than the Euro. It has continued to slide and as of August 15, 2006 one Euro is worth USD 1.2786. In other words the US Dollar has lost almost 30% of its value in less than 2 years. Who knows where it will end? But the oil producing countries have figured out that they could no longer price their oil in the same currency. So they switched to pricing oil in Euros with the result that American drivers pay even more at the pump. US manufacturers have consistently depended on the US market to sell their products. The domestic market is so large that few manufacturers ever thought of exporting their products to customers in countries of Europe, Asia or South America. That is even more true of the small and mid size companies. Furthermore until 2003, products “Made in USA” were more expensive than the ones found in other countries. So why spend time and money to fight a losing battle? The US manufacturers really had to have a superior product to beat out the international competition in their own countries.
2003 changed all that, but few people took notice. Although the federal and state government branches offer help in many ways of business development and loans, exporting efforts by our government are seemingly secretive. No-one seems to know about it and US exports amount to 60% of what Europe exports ($795 Billion vs $1,223 Billion in 2005). That hurts; it should be the other way around especially considering that the imports for both are similar in size ($1,480 Billion vs $1,304 Billion in 2005). The present currency exchange of 1 Euro = 1.2828 US Dollar (on August 17, 2006) gives US Manufacturers a 28% competitive advantage.
But wait, that’s not all. According to the Department of Labor, European employers pay their workers on average $ 24.64 per hour. However, US manufacturers pay their workers $20.40 per hour. That’s another 21% competitive advantage. The total for both is now 49%. Of course the wares need to be shipped and processed through customs. Figure between 17% and 19% for that and you are still left with a 30% competitive advantage. That’s our goose's golden egg. Is any-one gloating now of having such an advantage? Hardly. Instead, every day we hear stories of the Asian giants who are waking up. Every-one seems to be looking at the larger picture instead of what each of us can do to pick up one of those golden eggs.
The population of Europe is twice as large with 665 Million and 299 Million for the US. The combined GDP of all 48 European countries is $13,329 Trillion compared to $11,190 Trillion for the US. There is a market in Europe, it’s big, receptive and friendly to the American business models. Does it make sense to spend big efforts going against the flow of Chinese customers when European business open their arms wide open for our products?
Most Europeans professionals speak English, many of them having studied for advanced degrees in the US.
All of Europe is 7 hours ahead of the US Central Time zone with only the UK being 6 hours ahead. That presents a tremendous advantage for American companies. With all the technology of telephone, internet, online ordering and e-mails, American vendors have almost a full day to react to whatever order or issue their European customer may bring to their attention. By the time our day ends, we have shipped their order and resolved their issue. The European can start the next business day relieved.
In 2002 most of the European currencies ceased to exist and were replaced by the Euro. For the traveler – both business and tourist alike – that presents another advantage. There is no more wasting time to exchange US Dollars into three, four or more currencies when crossing borders. There are much less exchange fees and there is no need to carry different wallets.
Europeans are clamoring for American made quality. Whether it was because of liability issues or because the companies really wanted to please the customer, US manufacturers have come to produce high quality products, which the Europeans want. There is something to be said for the International Standards Organization, which oversees quality standards worldwide. It seems that more European companies have stepped up to the plate by adhering to these standards, when American companies were already applying these principles.
History has proven that the exchange rate will continue to erode the US Dollar against the Euro and following this line of thinking the competitive advantage may soon be 40%. However the balance of trade keeps on growing. If the US Dollar is weak, will the country be weak? In this age of global economies too many manufacturers still think domestic or even regional or local or have no knowledge on how to approach this issue. Let’s change that.
How? There is plenty of marketing and financial help available from government and non-government sources.
The US Commercial Service (www.export.gov), which is a division of the US Department of Commerce, has offices in over a hundred countries staffed with very knowledgeable people ready to help. Find your local contact at the above website and they will:
- Send you trade leads,
- Specifically assist American producers with finding prospects overseas in any branch of industry.
- Check up on the validity of a prospect,
- Offer translating services if needed and
- Do a tremendous job working the international tradeshows to offer the US vendors high value for their investment.
- Offer loans for exporting purposes through the SBA.
The International Trade Centers (www.iexportimport.com and www.fwic.org) offer
- FREE one-on-one counseling sessions by appointment or FREE online counseling for your convenience
- Biannual accredited training seminars on the Fundamentals of Importing and Exporting, NAFTA, Global Market Series-Importing, Global Market Series-Exporting and many more timely relevant seminars throughout the year
- Analysis of your current international trade strategy at any stage in your company’s life cycle
- Commissioned market research, including trade statistics, market analysis, and business planning
- Custom educational presentations to community organizations and students
- Trade missions
Other organizations will go as far as re-imbursing international marketing expenses up to $50,000 and Export Management Companies such as XL Group (www.xl-group.us) will:
- act as your international sales department
- help with the execution of the business development,
- provide sales efforts in the local language or at least the five major European languages,
- handle customer service issues and
- take on the financial risk.
